Wednesday January 30 1:13 PM ET

Probe Needed Into Enron's Calif. Deals

By Chris Baltimore

WASHINGTON (Reuters) - A member of the Federal Energy Regulatory Commission (news - web sites) said Wednesday that the agency should investigate whether bankrupt Enron Corp. (ENRNQ.PK) manipulated wholesale electricity prices in California.

Enron, accused by Western politicians of raising prices in long-term supply contracts following California's power crisis, has denied any wrongdoing.

``We need to clear up that lingering doubt,'' said FERC commissioner Nora Brownell, a Republican appointee to the agency last summer. ``If there was market manipulation, we need to find it and we need to deal with it.''

Brownell, speaking to reporters after a routine FERC meeting, made her comments after FERC Chairman Pat Wood testified on Tuesday before the Senate Energy Committee about Enron's impact on U.S. energy markets. Wood indicated during the hearing a willingness to open an agency investigation of Enron at the request of West Coast politicians.

Enron supported Brownell's appointment to FERC because she was a free market advocate while a member of the Pennsylvania public utilities commission.

The Houston-based company was among several independent power producers that enjoyed big increases in revenues early last year after Western spot market prices for wholesale power soared tenfold, to as high as $400 per megawatt hour.

The electricity crisis was linked to California's failed deregulation scheme that did not encourage new plant construction and barred the state's utilities from passing through higher wholesale prices to consumers.

The state eventually signed long-term supply contracts for some $42 billion worth of wholesale power supplies during coming years. Those contracts have been criticized by activist groups and some politicians as locking in prices well above market levels.

ALLEGED OVERCHARGES

Still pending before a FERC administrative judge is California's demand for some $9 billion in alleged overcharges by Enron and a dozen other wholesale suppliers. That case is unlikely to be determined for several more months.

Brownell was noncommittal on what action FERC should take if any market manipulation was found to have occurred with Enron's sales into California.

``I think there are tools we have to deal with the conclusion that someone manipulated the market,'' Brownell said. So far, there is no price data to show Enron did anything wrong, she said.

``We need to get to the underlying facts of the case,'' she added.

FERC has not officially opened an investigation yet but is expecting a formal request from Democratic Senators Dianne Feinstein of California and Maria Cantwell of Washington, an agency spokesman said.

Enron is accused of raising electricity prices in long-term supply contracts negotiated with the state of California following its power crisis.

Data presented at the Senate panel's Tuesday hearing by an independent power market analyst showed West Coast forward prices for wholesale power plunged by 30 percent on Dec. 3, the day after Enron declared the biggest bankruptcy in U.S. history.

Some Western senators said the data indicated Enron had inflated power prices before its bankruptcy. Sen. Ron Wyden, an Oregon Democrat, said he wanted to ``lift the veil of secrecy'' around Enron's wholesale power transactions in the West.

-- (Enron @ needs. enema), January 30, 2002

Answers

Enron was a wolf among sheep. It must have been fun laying off electricity to glutted minor markets, showing subsequent shortage and then watching the biggest fattest sheep swirl in panic. The most thoroughly sheared was California governor Gray (don't you just love my hair) Davis. Boy did he bite. The panic was complete to the tune of 6B of debt and upwards of 8B pledged in overmarket contracts all to maintain an in charge image. Did these guys ever find the right sucker.

Bluff calling goes a long way in business but deadly to the pol if it costs votes. Fear the reality of politics will never allow the benefits energy deregulation could offer.

-- Carlos (riffraff@cybertime.net), February 01, 2002.